Air India's insurance cover up for renewal, premium may soften

The Economic Times

MUMBAI: Public sector general insurers are competing with their private sector counterparts in London markets to bag the $ 27-million Air India insurance account, which will be up for renewal on October 1, a senior official said here today.

The insurers have to place their bids by September 7 and the national carrier expects its premium payout to fall because of soft reinsurance market. The struggling flag carrier is seeking a $9.6-billion cover for its fleet of over 100 aircraft.

Currently, AI has a cover from New India Assurance for a premium of $27 million, a company official told PTI.

Public sector general insurers led by New India Assurance who is the current insurer for AI and private sector insurers led by ICICI Lombard have visited London market, where Air India held a road show last week, to choose its reinsurers.

Large aviation accounts like Air India's get reinsured to the extent over 95 per cent in the London market and general insurers visit London to get reinsurance quotes from leading reinsurers before placing their bids.

Both the parties will submit their rates to Air India by September 7 which will choose the insurer which quotes the lowest premium.

Though there was no major claim by AI this year, globally, the recent Indonesian plane crash may have some impact when Air India's cover comes up for renewal, sources said, adding that "otherwise the market remains soft for airlines".

Despite some large claims, airlines' insurance cost globally and for domestic airlines, is likely to fall this year due to competition and better risk management practices, Martin Stevans, chief underwriting officer at Global Aerospace, a unit of AIG had told PTI earlier.

This would come as a double bonanza for bleeding airlines due to the steep fall in fuel prices after the massive crash in crude prices since the middle of last year.

"Despite a rise in volume in aviation insurance business in the country, the overall premia have fallen as the rates have remained soft in the global markets. We do see premia falling further here in the days to come. The reason being that there is too much of competition in the market," Stevens had said.

However, he did not quantify the fall in premium cost for the bleeding airlines, which have lost billions of dollars due to accidents and spike in oil prices last year.

Stevans had said due to intense competition and better risk management practices by domestic carriers, the premium is set to fall further this year.

AIG, which is the largest global aviation insurer with a 15 per cent market share, leads in providing reinsurance business to Air India and Jet Airways